Introduction of a new property tax in Croatia
From 1 January 2025, Croatia is replacing the previous tax on holiday homes with a new property tax. This decision was taken on Friday by the Croatian Parliament when it passed a comprehensive package of tax changes, which also affect income tax, VAT (PDV), flat-rate taxation in tourism and personal tax allowances, among other things.
The key changes at a glance
1. Property tax:
- The tax is between €0.60 and €8 per square metre.
- It is being introduced as mandatory for all local authorities, with each municipality able to set the amount of the tax individually.
- The state itself will also be liable for the tax.
- Exemptions:
- Properties used as a main residence (first property).
- Properties permanently occupied by family members.
- Properties let long-term for at least ten months a year.
- Uninhabitable, dilapidated buildings may also be exempt from the tax under certain conditions.
- Small landlords offering tourist accommodation in their own residential property remain tax-free.
2. Flat-rate tax on tourist rentals:
Depending on the municipality’s level of tourism development, the new rules set the flat-rate tax per bed as follows:
- Highly developed areas: €100–300 per bed.
- Medium development levels: €30–200 per bed.
- Less developed regions: €20–100 per bed.
3. Changes to income tax:
- The upper limit for the personal tax allowance rises from €560 to €600.
- The income at which a higher tax band applies increases from €50,400 to €60,000.
- Returnees from abroad get a five-year income tax exemption.
4. VAT:
- The turnover threshold for mandatory VAT registration rises from €40,000 to €50,000.
Criticism and political reactions
The opposition sharply criticised the introduction of the property tax. Critics such as Miro Bulj (Most) announced that they would not implement the tax in their municipalities. Others accused the government of further increasing the financial burden on citizens without offering long-term solutions to problems such as affordable housing.
Conclusion
The tax reform brings numerous changes affecting both homeowners and businesses. While the tax burden rises for some, others benefit from higher allowances and clearer rules. The long-term effects on the Croatian economy and the housing market will, however, only become clear once the new rules are implemented.
